I have dreams that somebody calls the options on a Pelosi trade and crushes them. It’s almost impossible for it to happen but it would be sweet justice.
Yep! Except, of course, the very definition of insider trading is knowing what a stock will do because of insider info. Hard to fuck up that kind of trade.
Say what you will about Martha, she stepped up and took her punishment. She could have appealed the conviction or pointed fingers at EVERY elected official doing the same thing, but she said I'm guilty, let's get this over with.
It's why I love her. She regularly visits a restaurant where I know some staff.They say she is pleasant, respectful, and grateful for their service...and a good tipper! That's Martha. Puts her money where her mouth is.
"It seems that while nodding their heads, Goldman, Morgan Stanley and Deutsche Bank ran to the exits and pulled the rip cord, selling millions of shares of the nine companies. "
I don't know why, but the context of this line made me laugh out loud. If 'they' were to make a movie of this episode, this scene could be a comic gold mine. Would love to hear the rip-cord-pullers POV on that action.
After a career in financial services, I taught for six years as an adjunct in a public university business school. I used Archegos as a business case in my regulatory compliance course. At the time these deals were made, there was no requirement for public disclosure of exposures created by these contracts. I am not sure that any exists today. I am not a fan of overbearing regulation, but simple disclosure of any contracts that create significant market risk - typically those that create highly leveraged exposures - should be a no brainer.
Great reporting, thanks! P.S., $120 million=chump change. Also, no surprise GS threw someone under the bus. Whatever they publicly state, expect the opposite.
Very well written Eric. I have to admit that I found myself chuckling through parts of the story... after all what a deserving bunch. While they all may be well educated the years of basting in arrogance, hubris and entitlement has a deleterious impact on intelligence. Thanks for the update.
I don't pretend to understand everything you wrote, but one question remains, for me anyway: what's to prevent this from happening again, using the exact same mechanism (TRS)?
I really don't know anything about finance, but it seems that every trading scheme that obfuscates will be abused by some or all of the biggest players to a degree that the entire global finance system is destabilized. Lucy pulled the football away every single time, but Charlie Brown never learned his lesson. Are governments doomed to forever be the Charlie Brown to the Lucy of the players at the top of the finance pyramid?
It is a very good question. I do not believe there have been any new disclosure requirements for TRS on publicly traded stocks. I always thought the real lawsuit should have come from investors in any of the nine stocks....If they knew a wildman like Hwang owned half the outstanding..no hedging...lots of leverage......would they have still stayed invested?
WTF were they thinking absorbing losses like that!?! The precedent thing to do was to go crying to their respective governments, and after all the hand-wringing and diaper changes, get a bailout. Taxpayers don't mind, and even if they do, the US proved that they're powerless to stop it.
The Credit Suisse internal report shamefully and cravenly blames their own risk department, when in fact the blame should fall on whoever the hell trusted Goldman, Morgan Stanley and Deutsche Bank to honor the agreement for a steady and quit unwinding.
I’d totally forgotten about this. Thanks for bringing it back up. You do a good job of explaining it.
I’ve seen so many of these in my 44 years in trading. Always the same thing. People believe what they need to believe in order to keep making the money others are making. (Especially thinking the MBS debacle of 2007-09).
I was literally the first guy Darrell Zimmerman bought puts (on the 30 year bond futures) from on his epic fraud. He walked around the options pit methodically putting in orders to buy puts. All in the 10 minute window between the open at 7:20am and the release of the NFP #, back when that was the thing. Singlehandedly tanked the entire UST market for 10 minutes! He blew up a clearinghouse and then ran off to Vancouver (IIRC), stymieing extradition for quite some time.
Was also just telling a friend about the BRE-X saga. I still have, somewhere, my “BRE-X Helicopter Crew” hat that my Canadian broker gave me!
The explanation would have been cleaner with sample round numbers for shares and valuations. You wrote about 10 million shares and $20 million without tying the dollar amount to anything. I suspect that you meant 20 million shares.
Well...you could have mentioned what Hwang hoped to accomplish with this TRS. I mean, you mentioned that he was a big loser, too. What is the purpose of these TRS? Were the banks benefitting from the TRS being on their balance sheets? (Seems like they would have with all that inflated value.) Why would they hold these anonymous transactions? Did ANYone make money on this stuff? If yes, who?
The big question is what financial shenanigans are going on right now and who is benefiting. Count on government undersight to ensure discovery is ex post facto.
I have dreams that somebody calls the options on a Pelosi trade and crushes them. It’s almost impossible for it to happen but it would be sweet justice.
Yep! Except, of course, the very definition of insider trading is knowing what a stock will do because of insider info. Hard to fuck up that kind of trade.
Has Martha Stewart weighed in on this yet?
Say what you will about Martha, she stepped up and took her punishment. She could have appealed the conviction or pointed fingers at EVERY elected official doing the same thing, but she said I'm guilty, let's get this over with.
It's why I love her. She regularly visits a restaurant where I know some staff.They say she is pleasant, respectful, and grateful for their service...and a good tipper! That's Martha. Puts her money where her mouth is.
As Pelosi said at the time, "This is America."
Oh.
"It seems that while nodding their heads, Goldman, Morgan Stanley and Deutsche Bank ran to the exits and pulled the rip cord, selling millions of shares of the nine companies. "
I don't know why, but the context of this line made me laugh out loud. If 'they' were to make a movie of this episode, this scene could be a comic gold mine. Would love to hear the rip-cord-pullers POV on that action.
Agreed, hilarious!
Yeah, the notion that anyone would trust investment bankers(!) to not do a thing that would cut their losses/increase their gains is baffling.
After a career in financial services, I taught for six years as an adjunct in a public university business school. I used Archegos as a business case in my regulatory compliance course. At the time these deals were made, there was no requirement for public disclosure of exposures created by these contracts. I am not sure that any exists today. I am not a fan of overbearing regulation, but simple disclosure of any contracts that create significant market risk - typically those that create highly leveraged exposures - should be a no brainer.
Great reporting, thanks! P.S., $120 million=chump change. Also, no surprise GS threw someone under the bus. Whatever they publicly state, expect the opposite.
Very well written Eric. I have to admit that I found myself chuckling through parts of the story... after all what a deserving bunch. While they all may be well educated the years of basting in arrogance, hubris and entitlement has a deleterious impact on intelligence. Thanks for the update.
You do an excellent job of explaining the myriad corruptions in high finance. It might be your “sweet spot”.
I don't pretend to understand everything you wrote, but one question remains, for me anyway: what's to prevent this from happening again, using the exact same mechanism (TRS)?
I really don't know anything about finance, but it seems that every trading scheme that obfuscates will be abused by some or all of the biggest players to a degree that the entire global finance system is destabilized. Lucy pulled the football away every single time, but Charlie Brown never learned his lesson. Are governments doomed to forever be the Charlie Brown to the Lucy of the players at the top of the finance pyramid?
It is a very good question. I do not believe there have been any new disclosure requirements for TRS on publicly traded stocks. I always thought the real lawsuit should have come from investors in any of the nine stocks....If they knew a wildman like Hwang owned half the outstanding..no hedging...lots of leverage......would they have still stayed invested?
Maybe they figured the only party they could successfully sue would be Hwang, and he's probably broke.
Is the Private Equity market another debacle waiting for public funds bailout?
Finally! Somebody goes to prison for cheating and dirty dealing. Should be a hell of a lot more.
Didn't Martha Stewart go to prison for a lot less?
And she was one of the elite. Who did she p*** off?
This kind of reporting is why i subscribe. Thank you.
WTF were they thinking absorbing losses like that!?! The precedent thing to do was to go crying to their respective governments, and after all the hand-wringing and diaper changes, get a bailout. Taxpayers don't mind, and even if they do, the US proved that they're powerless to stop it.
The Credit Suisse internal report shamefully and cravenly blames their own risk department, when in fact the blame should fall on whoever the hell trusted Goldman, Morgan Stanley and Deutsche Bank to honor the agreement for a steady and quit unwinding.
I’d totally forgotten about this. Thanks for bringing it back up. You do a good job of explaining it.
I’ve seen so many of these in my 44 years in trading. Always the same thing. People believe what they need to believe in order to keep making the money others are making. (Especially thinking the MBS debacle of 2007-09).
I was literally the first guy Darrell Zimmerman bought puts (on the 30 year bond futures) from on his epic fraud. He walked around the options pit methodically putting in orders to buy puts. All in the 10 minute window between the open at 7:20am and the release of the NFP #, back when that was the thing. Singlehandedly tanked the entire UST market for 10 minutes! He blew up a clearinghouse and then ran off to Vancouver (IIRC), stymieing extradition for quite some time.
Was also just telling a friend about the BRE-X saga. I still have, somewhere, my “BRE-X Helicopter Crew” hat that my Canadian broker gave me!
Your explanation of TRS needs a little cleanup
I did a fair amount of them back in the day.....tried to make it simple.... what did I miss?
The explanation would have been cleaner with sample round numbers for shares and valuations. You wrote about 10 million shares and $20 million without tying the dollar amount to anything. I suspect that you meant 20 million shares.
ahh....thank you.
You are welcome. Please share with Matt, I corrected once too. I really appreciate what all of you at Racket are doing and wish you great success.
Great God, Eric! And people say poetry's difficult. I understood zilch, ABSOLUTE ZILCH. Loved photo of Hwang the Magnificent. Where is he now?
I believe he is in jail...New Jersey
Well...you could have mentioned what Hwang hoped to accomplish with this TRS. I mean, you mentioned that he was a big loser, too. What is the purpose of these TRS? Were the banks benefitting from the TRS being on their balance sheets? (Seems like they would have with all that inflated value.) Why would they hold these anonymous transactions? Did ANYone make money on this stuff? If yes, who?
The big question is what financial shenanigans are going on right now and who is benefiting. Count on government undersight to ensure discovery is ex post facto.
Private Equity lending
120MM lol.
It'll just get pushed back into the grift pipeline and fund someone's summer home teardown.
This is exactly the kind of scum Musk should have been working on cleaning up, instead of pennies and nickels of social service entities.
The $600 TRILLION OTC SWAPS are unregulated and opaque. Lord knows how much drug money is being laundered.